Fortum's position on Small-scale distributed electricity generation

12/7/2012 12:08 EET

Position papers

Fortum welcomes the spreading of small-scale electricity generation as a positive trend that will increase the freedom of choice for consumers, improve the functioning of the market, and create various societal benefits.

The biggest economic benefit for small-scale electricity producers comes from a reduction in the amount of electricity they need to purchase. They can also get additional income from the electricity they sell back to the grid. Fortum is of the opinion that rapid spreading of small-scale generation is best served by market-based competition between suppliers on the market.

Small-scale electricity generation technologies are still relatively new and not always competitive compared to market prices. There is a need to support these emerging technologies by creating and applying a common framework for grid access, taxation, and other rules needed in an efficient market. Developing this common framework requires action from industry as well as governments.

Given the fact that small-scale distributed electricity generation can hardly benefit from subsidies designed for other types of renewable electricity, due to the small scale and consequent high administrative cost, it may be justified to subsidise small-scale production by other means. If this is done, subsidy schemes should be transparent and clear; for example, direct subsidy or tax breaks either in income taxes or through VAT reductions for the initial investment.

On the other hand, the electricity market, per se, should be left for open competition. Buy-back obligations, mandatory net debiting, or price regulation cement the market leading to inefficiency and higher costs. Such measures also hinder new innovative services and solutions to enter the market. Retail companies should be free to compete for the buy-back customers based on price, business models and combined services.

Fortum is of the opinion that:• Small-scale electricity generation benefits consumers and the whole society• The greatest economic benefits for consumers come from reduced electricity purchases• A competitive market provides the best solutions for small-scale production• Common standards for grid connection is the first step to help the market expand• Taxation of small-scale production should be clear and simple• Subsidies, when available, should be transparent and not affect competitive markets• Net debiting should be left for market players to decide